TaxTMI 
TaxTMI 
2022 (6) TMI 1549
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....constitute payments for Independent Personal Service instead of 'Fees for Technical Services" as defined under Article 12/13 of the respective DTAAs? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in holding that the payments made by the assessee to its associate concerns based in Philippines, United Kingdom constitute payments for Independent Personal Services instead of "Royalty" as defined under Article 12/13 of the respective DTAAs? 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the services rendered by the associate concerns to the assessee constitute "Independent Personal Services" under DTAAs not appreciating that only those services performed by an independent non-resident alien contractor would constitute "Independent Personal Services" under DTAA which is not the case here as in this case, the Services were rendered by the Group entities to an Indian entity which were closely working with each other? 5. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in holding that the KPMGI Co-operati....
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.... Total 1,00,10,845 5. On the similar issue, ITAT, Mumbai in assessee's own case for AY 2008-09 and AY 2009-10 decided in favour of assessee. However, AO ignored the same while deciding the issue and held as under:- "3.4 The submission of the assessee has been duly considered. On perusal of the copies of invoices, letters of engagement and correspondence relating to the Sweden, Singapore, UK, USA and entities, it is seen that: 1. The services rendered by the abovementioned entities are in areas of application of high skills as well as technical knowledge. 2. These entities have actually caused the imparting and creating of specialized documents requiring use of high skills and technical knowledge. 3. These entities have provided services which do give enduring benefits to the assessee. 4. The assessee is enabled to use the knowledge shared by the abovementioned entities during the course of provision of services in various assignments handled by it for its clients. 3.5 It is thus very clear that the services provided by these entities make available technical knowledge, experience, skill, etc. to the assessee and accordi....
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....the income is from profits and gains of business, it would be computed under the Act as provided at the time of regular assessment. The purpose of sub-section (1) of Section 195 is to see that on the sum which is chargeable u/s. 4 of the Act, for levy and collection of income tax, the payer should deduct income-tax thereon at the rates in force, if the amount is to be paid to a non-resident. The said provision is for tentative deduction of income-tax; the rights of the parties are not, in any manner, adversely affected. Further the rights of the payee or recipient are fully safeguarded u/s 195(2), 195(3) and 197. The only thing which is required to be done is to file an application for determination by the AO that such sum would not be chargeable to tax in the case of the recipient, or for determination of the appropriate proportion of such sum so chargeable, or for grant of a certificate authorizing the recipient to receive the amount without deduction of tax, or deduction of income-tax at any lower rate. On such determination, tax at the appropriate rates could be deducted at source. If no such application is filed, income tax on such sum is to be deducted and it is the statutory....
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....2009-10 decided on 06.05.2016, in assessee's own case held as under: "In the context of payments made to KPMG Tax Services Pvt. Ltd., Singapore, KPMG LLP, Singapore and KPMG Tax Advisor, Belgium, the CIT (Appeals) noted that they are companies registered in the respective countries, who have rendered services outside India. Such services related to assistance in audit, taxation, information technology services, conducing background checks, etc. Considering the nature of the services rendered, which is not disputed by the Revenue, in our view, the CIT(Appeals) made no mistake in holding that the payments are not 'fee for technical services'. The aforesaid services have been rightly held to be outside the purview of Article-12 and/or Article-13 of the respective tax treaties, and instead such income falls within the scope of Article-7 thereof i.e. in the nature of 'business profits'. It has also (Assessment Year : 2009-10) not been disputed that such entities do not have a permanent establishment in India, therefore, such incomes are not chargeable to tax in India so as to require deduction of tax at source. On this aspect also, we affirm the stand of the CIT (Appeal....
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....thin the purview of Article-12 of Indo-US Double Taxation Avoidance Agreement. It is also an established fact that such non-resident recipients do not have permanent establishment in India and, therefore, in the said background the same can, at best, be treated as independent personal services covered by Article15 of the Indo-US Double Taxation Avoidance Agreement. As a consequence and in the absence of any fixed base in India, such income cannot be held chargeable to tax in India so as to require deduction of tax at source. (Assessment Year: 2009-10) Therefore, invoking of section 40(a) (i) of the Act to disallow such expenditure is not tenable. 10. With regard to the remittances for professional fees to Sri Lanka, Indonesia and Bangladesh entities, the services did not fall under the ambit of Article 22/23 of the respective tax treaties dealing with other income correlated with the fact that the entities based in these countries did not have any Permanent Establishment in India, hence did not attract section 195 of the I.T. Act as the said payments were not in the nature of income chargeable to tax in India. 11. In this regard, assessee relied on the decisions of the ITAT i....
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.... the Act to be evoked. We, therefore, uphold the finding of the learned CIT (A) on this issue which has not been controverted before us by the Revenue. 2.3 I have considered the facts and perused the material on record. It is noticed that Rahman Rahman Huq, Bangladesh and KPMG Mauritius are firms of individuals registered in Bangladesh and Mauritius respectively. KPMG Portugal, KPMG Sweden, KPMG Netherlands, Background Bureau Inc., USA Scherzer Intl, USA, KPMG IFRG Lid, UK and KPMG USCMG Ltd, UK are companies registered in the respective countries. The services were entirely rendered outside India. Further the services relate to assistance in audit, taxation, information technology services, conducting background checks, responses to queries related to International Financial Reporting Standards and review of documents to be filed with Securities and Exchange Commission in respect of companies listed in US stock exchanges which are not fees for technical services in nature and having been rendered outside India, fall outside the purview of Article 12/13 of the respective tax treaties, therefore the income fell under the ambit of Article 7 of the respective tax treaties dea....
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....se acknowledges that the Sub licensor's right to the KPMG Marks derive exclusively from the Sub licensor's rights under the Membership Agreement and that the sublicense to the KPMG Marks granted pursuant to this Section 4 is derivative there from and subject to the terms and conditions of such Membership Agreement. The Signatory Sublicense further acknowledges that the right of KPMG International to license the KPMG Marks is subject to the terms of the Component License Agreement and the Signatory Sub licensee agrees that it shall not take any action that contravenes the terms of the Component License Agreement. b) Upon the terms and conditions hereinafter set forth, the Sub licensor hereby grants to the Signatory Sub licensee, and the Signatory Sub licensee hereby accepts, the non-exclusive rights, license and privilege to use the KPMG Marks in connection with its marketing and providing of services permitted to be provided by the Signatory Sub licensee in accordance with the provisions of this Agreement, the Statues and the Policies and Regulations, and on products related to such services. Such grant shall include the right and license to issue engagement reports in the....
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....the Appellant is a member of KPMGI. The objectives of the KPMGI relate to the development, co-ordination, support, promotion and facilitation of the operations/ services of the KPMG Member Firms to its clients in various ways. KPMGI does not make any profits on its activities and does not have any commercial purpose. All members contribute to their share of costs incurred by KPMGI in providing support to the Member firms. The total costs are shares amongst member firms based on their budgeted revenues and collected in advance/ instalments and adjusted year-on-year for any shortfall/ excess recovery for the eventual benefit of members. 16. We have given due consideration to the findings of the AO, submission of the assessee and relevant agreement filed by the assessee between assessee and KPMGI Cooperative, Switzerland. 17. Keeping in view the agreement between assessee and KPMGI Co-operative, Switzerland, it is apparently clear that KPMGI Co-operative, Switzerland is a mutual association; there is a complete identity between the contributors and participators. The actions of the contributors and participators are in furtherance of the mandate of the association and no outs....